Trulia did a great State of the Real Estate Union broadcast. It was long, almost an hour. If you are interested in hearing a well assembled panel talk about real estate, without it being full of the rosy optimism so common in the professional association of Realtor organizations that I am a somewhat conflicted participant in, then take a moment to listen to these interesting perspectives while you….file your paperwork for tax time, sort out a drawer in the kitchen, I don’t know. You’ll need something else to do but it is worth a listen. Among the topics that caught my attention, Strategic Non-Foreclosure.
Listen up all buyers who have been watching RealtyTrac or listening to the news, waiting for the full fall out of April 2010 loan resets, the sky MAY NOT fall. The banks are slow, slower than watching paint dry, or my daughter getting her shoes on, but they are getting better and the better they get, the better they are going to be able to act, to their own benefit. They are working on pre-approved short sales, for those who don’t qualify for loan modifications. There are almost ½ million temporary loan modifications issued nationwide and banks want to be able to switch those that can’t make payments under the temp loan mods to a preapproved short pay, not a foreclosure. And they are so concerned about having too many foreclosures this panel talked about them doing Strategic Non-Foreclosures, where the bank doesn’t start the foreclosure process on property they are not prepared to manage. So the homeowner could remain in the property for a year. (They have kind of done this in the past because they could figure out who owned which properties when so many banks collapsed but that’s another story because they didn’t actually plan it, now did they?)
Then, there are consumers who are looking at the situation and going, hmmmm pay twice as much mortgage for a place that is worth ½ as much as I owe on it OR rent a nicer unit down the street for less. Which should they do? The New York Times cover February 4th discussed that some homeowners predict that it will be 2025 before they are right side up in their property value. You can put a lot of money aside and restore your good credit prior to 2025 if you move on now. This choice is a consumer Strategic Foreclosure. Otherwise, consumers feel they are throwing bad money after good. Consumer mentality about keeping the home changes as it become more socially acceptable to say “oh, I bought at the wrong time, I got a bad loan, I had to let it go” and who should judge, really. The borrower focused on in the article was a 20% down conventional 30 year fixed buyer, not the kind of no money down, no income qualifying buyers we are used to reading about. So, just as banks are making their “savvy” financial decisions, who is to say that consumers shouldn’t be doing the same. No one is coming in and bailing out consumers. The average joe is getting stuck with the debt, the long-term loss and the tax burden of the bail out…but this could be fodder for enough blog posts to last a year.
Real estate happens local. (So, if you are reading my blog from an area other than Ventura County, skip this paragraph.) Locally, in Ventura County, many areas have too little inventory. In fact, today I ran a search for homes built 20 years or newer, priced between 550-600,000 and around 2000 sq ft on a modest size lot. There were 4 homes available in this criterion, 4 homes. I have a list of ready, willing and able, qualified buyers who can not find housing, in a variety of price ranges, and I am just one Realtor. As the Trulia broadcast points out the federal government is bolstering the housing market. With fantastic interest rate, a tax credit and no inventory, we are pushing prices up. We are still in a multiple offer scenario for many, many homes that hit the market. And Trulia’s panel points out that they don’t see the Fed backing off of that support.
So even with all these things going on with foreclosures, it is going to take something more to make the sky fall, an earthquake in California would do it. Giant interest rates would make things interesting but with housing being about affordability, the combination of interest rates rising and prices dropping will still yield the same affordability.
If you are thinking about buying, be looking for the right home for you at the right time for you and don’t worry too much about what is going on with foreclosures in the future. It is all changing and morphing and unpredictable. Make your choices based on what is going on now, for you. Find a great value by knowing what you want and what you can afford and looking at everything in your price range, regardless of who the seller is or who might be selling in the future.
I don’t have a crystal ball, but I think the likelihood of an earthquake, completely unpredictable act of nature, happening and dragging down the local real estate market is greater than the odds of the anticipated foreclosure activity causing a substantial dragging down. Lets’ all hope that neither occurs.
